On Saturday, June 18, 2005, peace returned to Reliance, India's largest business group, after a settlement was hammered out between the two warring brothers at its helm. During seven months of a nasty public feud, the $23 billion group controlled by the Ambani family seemed close to breaking up. The dispute drew out Kokilaben Ambani, the mother of two warring brothers, from her role as homemaker to center stage. "With the blessings of Srinathji (a reference to the Hindu god Krishna), I have today amicably resolved the issues between my two sons, Mukesh and Anil," she said in a brief statement.
Now, the group's two parts seem set to become greater than the whole, unlocking hidden value and unshackling ambitious expansion plans. As Anil Ambani, 46, the younger of the brothers said: "For us, 1 plus 1 now means 111." He now has control of the group's companies in power, telecommunications and financial services, while his brother Mukesh, 48, will retain Reliance's petrochemicals, polyester and refining companies. Within a week of the settlement, Anil announced a slew of projects valued at more than $18 billion. Mukesh already has in his pipeline nearly $10 billion of investments, mostly in expansion projects.
As the saga closes a chapter in Indian business, it offers insights for large, family-owned industrial houses all over the world. Perhaps the most significant lesson is that poor transparency can depress value for companies and their shareholders. The group's flagship Reliance Industries is a cash cow, and it had invested up to $4.3 billion in affiliate companies. Some of those were unlisted entities such as Reliance Infocomm, in which the parent company invested $2.75 billion. After the settlement, the process has begun to convert some of those investments from preferred equity to common equity shares at higher, updated valuations, literally unlocking hidden value.
The Ambani truce also shows why business families need to manage their ownership structure in group enterprises.
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